I recently heard Emil Tedeschi (President and Chief Executive Officer of Atlantic Grupa) speak at the Slovenian Marketing Conference 2019 where he, quite inspiringly so, gave participants the following advice: “The greatest enemy to your future success is your past success.”
Since I am someone who is passionate about change management, his statement resonated deeply with me and inspired me to write this article. Besides believing that complacency can be a “silent killer” to an organisation, I also believe that the strategy, business models, mindset and behaviour that served you in the past can be the biggest bottleneck in growing and transforming your business in the future. HERE IS WHY.
From 2015 to 2018 I had the privilege to lead the research on “Management and Leadership Development Needs in Dynamically Changing Societies” in which we interviewed more than 200 CEOs across different industries operating in 11 countries (Croatia, Russia, Estonia, Slovakia, Hungary, Slovenia, Latvia, South Africa, Lithuania, Ukraine, Poland).
While analysing the results of the interviews for the book, I realised that all organisations, regardless the size, years of operation, industry or country, have been challenged by similar challenges, such as:
1) NEGATIVE DEMOGRAPHIC TRENDS, these are especially relevant for European organisations, which are challenged by a severe lack of employees on one hand, and attractiveness and retention of the best talents on the other. Besides these implications, negative demographic trends are also reflected in our graying society (ageing population) and the high rate of brain drain. All these implications force business organisations to find new ways of recruiting and retaining their people, as well as for working effectively with different generations;
2) ICT AND AI INNOVATIONS have challenged organisations to start with digital transformation in order to optimise their internal processes and meet the expectations and needs of their customers. Digital transformation is the number one topic in European organisations, regardless of the industry they belong to, that forces organisations to introduce new business models, services and products supported;
3) CHANGED CUSTOMER BEHAVIOURS AND NEEDS have challenged organisations to start systematically collecting and analysing big data in order to better understand their customers and meet their needs by personalising and customising their services and products. This in turn requires reconsideration of current business models and fresh ideas that are usually retrieved from spin-off companies, start-ups, incubators, accelerations, etc. The need for innovating and thinking “outside the box” in all industries has never been bigger;
4) INCREASED COMPETITION, not only from existing competitors, but from start-ups or SMEs coming from totally new or different industries that have exciting business models. This results again in the need for getting new innovative ideas on how to respond to the increased competition that should not be ignored or underestimated;
5) CONSTANT REGULATORY CHANGES that are especially relevant for the regulated industries, like financial organisations, the pharmaceutical industry, etc.
The majority of CEOs that participated in the research explained that all these challenges have forced their organisations to rethink current business models and reinvent traditional structures and approaches to managing and leading organisations and people. The need for change has become bigger than ever.
Claiming this is something new to the business world would be perceived as over-exaggerating. Moreover, I would most likely be faced by sceptics who would say that organisations have been always faced by volatility, uncertainty, complexity and ambiguity, and external challenges that forced them to change.
Yes, changes and transformations in the business world have indeed been occurring forever. Actually, without the innovations and constant transformations of the business world, we would not be able to have such high standards of living, working, and interacting with each other.
However, what is new to the business world today is that the pace of change has become extremely rapid and the need for change covers all areas of doing business, from marketing, accounting, financial management, HRM and IT; to managing organisations and leading people. Demographic trends, digitalisation and changed customer needs have disrupted all functions - all industries - all over the world.
Irrespective of the general awareness that the need for change has become bigger than ever, my observation is that we can find three different types of organisations in terms of perceiving business challenges and managing and leading necessary change.
1) TYPE: The first type of organisation has a “SUPERIORITY SYNDROME”.
These organisations have become complacent because they believe their success is due to their inherent superiority and there is no need to change anything. They observe today’s business circumstances (volatility, uncertainty, complexity, ambiguity) with skepticism and believe that no one and nothing can disrupt their position on the market – neither the business models that have been in place for decades, nor the management and leadership approaches that do not necessarily follow the contemporary trends in the field of leadership. In terms of the business challenges that were identified in the research, the sense of urgency for any change in these organisations is very low. These organisations always remind me of the following proverbs: “Arrogance is a kingdom without a crown,” and “Arrogance is unhealthy ego in need of repair” (Thomas Faranda).
2) TYPE: The second type of organisation is the one that manages and leads changes/organisational transformations with “YESTERDAY’S LOGIC”.
These organisations have a high sense of urgency to change and do understand that they will have to reinvent their business models due to prevailing business challenges, strategies and management and leadership approaches. However, they also believe that by changing strategies, business models, policies, etc. they will do enough in terms of leading and managing necessary change.
This is yesterday’s logic. According to McKinsey (2015), “change management as it is traditionally applied is outdated. We know, for example, that 70 percent of change programs fail to achieve their goals”. Some of these insights have been confirmed by the research done by ICF and HCI (2018) where “85% of organisations have experienced an unsuccessful change management initiative in the past two years” (ICF and HCI 2018, 6) due to personal resistance to change, poor communication, insufficient training and a failure to prioritise new initiatives (ICF and HCI, 2018).
Even though we should have learned by now that “yesterday’s logic” does not work and that Kotter warned us about eight common mistakes that result in unsuccessful change already in 1995, I still observe that organisations lead and manage change by repeating the same old mistakes (lack of clear vision, lack of communication, not removing obstacles to the new vision, no systematic planning, not making changes to the organisational culture). The irony is that these organisations often claim that changes and transformations are still not met with open arms by their employees.
Not only do many organisations fail miserably in introducing change initiatives due to a lack of knowledge about the necessary steps to be made in order to transform themselves in a new era, they also fail because they ignore or do not know how to address their employees’ resistance to change. These organisations still do not understand that they have to involve employees in change management initiatives and work on mindset, behaviour, emotions and habits as well while changing strategies, business models, etc.
3) TYPE: The third type of organisation has a high sense of urgency to change, but at the same time understands that people build their business and that the new logic comes with a human touch to leading and managing change. These are EMPLOYEE-CENTRED ORGANISATIONS that, in the process of addressing business challenges and leading and managing change, address both parts: the tangible (strategies, business models, processes, management and leadership approaches, etc.) and the intangible or invisible part (organisational cultures, mindset, behaviours, emotions, habits).
These organisations are aware of a new stage of consciousness (Laloux, 2014) that has raised requests from employees for having a personal sense of meaning in their work and to be part of purposeful organisations that contribute to society. Therefore, they understand that if the invisible part is not addressed properly, the tangible part will fail as well. It seems that these organisations have invented “a new logic” of managing and leading change; one that Peter Drucker recommended us more than a decade ago, and we should all learn from them.
My observation is that employee-centred organisations concentrate on their employees rather than numbers and understand that great figures are only the result of a personalised and human leadership approach. As Richard Branson says, “business is about people, people and people”.
When introducing change initiatives, these organisations not only address the tangible parts of their business, but also focus on shifting the mindset of their employees. After that, they work diligently and patiently on changing behaviours that would allow implementation of change initiatives, and enable their sustainability later on. Talking to people is the most important job for change leaders in these organisations.
In one of my favourite books Reinventing Organizations (2014), Frederic Laloux explains that every time when humanity shifted to a new stage of consciousness, it invented a radically new way of organising, managing and leading organisations.
I believe it is high time that organisations all over the world, regardless of their size and industry, recognise that we have entered a new stage of consciousness and that they should start applying the “new logic” of leading and managing change where tangible (strategies, business models, processes, management and leadership approaches, etc.) and intangible or invisible parts (organisational cultures, mindset, behaviours, emotions, habits) are equally important in achieving sustainable change.
Organisations using this approach to lead and manage change would be able to successfully address numerous business challenges brought on by demographic trends, ICT and AI innovations as well as changing customer behaviours and needs, increased competition, regulatory changes, etc.
If not, we will continue to hear about failed organisational transformations and recognise in a decade or so that some organisations neither have a crown, nor a kingdom.
REFERENCES
1. International Coach Federation (ICF) and Human Capital Institute (HCI). 2018. Building a Coaching Culture for Change Management. ICF.
2. Kotter P., John. 1995. Leading Change. HRB’s 10 must reads On Change Management. 2011.
3. Laloux, Frederic. 2014. Reinventing Organizations.
4. McKinsey, 2015. Changing Change Management. Written by: Boris Ewenstein, Wesley Smith, and Ashvin Sologar. Retrieved from: https://www.mckinsey.com/featured-insights/leadership/changing-change-management
5. Purg, Danica, Braček Lalić, Alenka and Pope, Jennifer, ed. 2018. Business and Society, Making Management Education Relevant for the 21st Century. Springer.
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